S&P 500 Posts Largest 2026 Drop as Nine-Week Winning Streak Ends

The S&P 500 recorded its largest single-day decline of 2026 on Friday after a stronger-than-expected jobs report reduced expectations for Federal Reserve interest-rate cuts in 2026. The drop ended the index's nine-week winning streak and was led by semiconductor stocks. The iShares Semiconductor ETF posted its largest daily loss since March 2020.

and Positioning Morgan Stanley CIO

Michael Wilson described the sell-off as a "healthy reset" that supports continued gains. He maintained the firm's year-end target of 8,000 for the S&P 500, which would represent a 7.5% increase from Monday's opening level. Wilson noted that earnings and macro data remain supportive of broader market participation.

He said the decline was amplified by crowded positioning in semiconductor and memory stocks, which account for about 25% of the global hedge-fund book.

Wilson said the path for markets will depend on how quickly positioning normalizes and how rates, rate volatility, oil, and the U.S. dollar perform. The 10-year Treasury yield stands at 4.51%, above the level the firm has flagged as a bearish indicator for equities.

The Federal Reserve is scheduled to announce its next interest-rate decision on June 17. Investors now see a rate hike before year-end as the most likely outcome, according to CME's FedWatch tool. Fresh inflation data will be released this week, with the CPI report due Wednesday and the PPI report due Thursday.